You’ve had that great business idea for months – maybe even years. But with economists talking about a global recession, you might be thinking it’s best to shelve your dream until conditions improve. While that might sound sensible, it’s actually not. If you have a good idea, there’s no better time than the present to get started, even if things are slowing down economically. The big challenge, whether the economy is booming or waning, is making it work financially – and that means getting the right start-up money in place.
How much is enough?
Contrary to what you might think, you don’t need to be rich to start your own business. But you do need to have enough money in the bank to live on until you start to see profits. Plan to live off your savings for at least three months, maybe longer. Calculate all your monthly costs including your own living costs, business rent/utilities, advertising, supplies, and any other expenses you can expect to incur. Then multiply that by the number of months you think it will take before you start seeing profits. From there, tack on another 25 percent to be on the safe side.
Finding the money
There are a few places to go for small business financing. You can start with your own resources – remortgage your house, draw on savings, or use your line of credit or credit cards to get started. If you need more than you have, then make sure you have a rock solid business plan, complete with a marketing plan, goals, and research to show how your venture will tap into market need. Armed with that, you can try getting a small business loan from your own bank or one that specializes in working with small businesses. Consider going to the Business Development Bank of Canada – they’re set up to support business and they have financing programmes to help new businesses that can demonstrate long-term potential get off the ground.
There are also a host of different small business grants you might be eligible for, depending on what industry or sector you are targeting, who you are, and where you live. A good place to start is Industry Canada – their site lists a host of different grants to help small businesses get their start.
Enter the dragon’s den
You could also consider finding an investor to help you finance your start-up. Angel investors, venture capitalists and private lenders can be a great source of start-up capital and, if you find the right one, they can also act as mentors and help you grow your business with good advice and contacts. It is tough to get an investor to put money into an untested business, however it’s not impossible. Preparing an investor-ready business plan is key – it will outline everything a potential investor needs to know to understand what kind of returns they can expect to see on their investment and how your business is going to meet those returns.